Financial literacy, robo-advising, and the demand for human financial advice: Evidence from Italy

TL;DR

This study examines how financial literacy, confidence, and digital skills influence Italian individuals' use of robo-advisors and their relationship with human financial advice, revealing complementary and substitutive dynamics.

Contribution

It provides new empirical evidence on the interplay between robo-advisory adoption and demand for human advice in Italy, highlighting hybrid financial consulting models.

Findings

Greater financial knowledge reduces reliance on robo-advisors.

Confidence and digital literacy increase robo-advice usage.

Robo-advice complements independent human advice but substitutes non-independent advice.

Abstract

This paper investigates the impact of objective financial knowledge, confidence in one's financial skills, and digital financial literacy on individuals' decisions to seek financial advice from robo-advice platforms. Using microdata from the Bank of Italy's 2023 survey on Italian adults' financial literacy, we find that individuals with greater financial knowledge are less inclined to rely on online services for automated financial advice. Conversely, confidence in one's financial abilities and digital financial literacy enhance the likelihood of utilising robo-advice services. Trust in financial innovation, the use of digital financial services, and the propensity to take risks and save also emerge as significant predictors of an individual's use of robo-advice. We also provide evidence of a significant complementary relationship between the adoption of robo-advisory services and the demand for independent professional human advice. By contrast, a substitution effect is found for non-independent human advice. These findings highlight the importance of hybrid solutions in professional financial consulting, where robo-advisory services complement human financial advice.